Rep. Royce fights to fix Fannie, Freddie

June 22, 2010

Updated Aug. 21, 2013 1:17 p.m.

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Rep. Ed Royce, left, participates in the Senate-House Conference Committee meeting on Capitol Hill Tuesday. The committee is dicussing the financial regulatory reform bill. Next to Royce is Rep. Spencer Bachus,R-Ala. and next to him is the committee chair Rep. Barney Frank, D-Mass. Next to Frank are Reps. Maxine Waters, D-L.A. and Carolyn Maloney, D-N.Y. MARK WILSON, GETTY IMAGES

Rep. Ed Royce, left, participates in the Senate-House Conference Committee meeting on Capitol Hill Tuesday. The committee is dicussing the financial regulatory reform bill. Next to Royce is Rep. Spencer Bachus,R-Ala. and next to him is the committee chair Rep. Barney Frank, D-Mass. Next to Frank are Reps. Maxine Waters, D-L.A. and Carolyn Maloney, D-N.Y. MARK WILSON, GETTY IMAGES

WASHINGTON – Capitol Hill lawmakers are spending this week putting the finishing touches on a massive overhaul of the way the country's financial system is regulated. But for Rep. Ed Royce, there is only one issue that really matters.

Royce, R-Fullerton, is a member of the 43-member bipartisan conference committee that this week is trying to reconcile the differences between the House bill and the Senate bill. Although he is involved in negotiations on several parts of the proposed law, his focus is on the possibility of reforming Fannie Mae and Freddie Mac, which is barely mentioned in the nearly 2,000-page measure.

A senior member of the Financial Services Committee who has worked to reform Fannie and Freddie since 2004, Royce believes that those two government-sponsored lending giants, which provide loans for the majority of American homebuyers with mortgages, caused the entire economy to collapse in 2008 by making too many risky loans and falling into massive debt.

The bailout of the two institutions, which are temporarily being run the government, has already cost taxpayers $145 billion and may end up costing them $450 billion.

"I don't think any regulatory reform effort is going to be complete or is going to be effective without addressing the two institutions most responsible for the collapse of the housing market," Royce said in an interview.

Democrat leaders disagree. They argue that reform of the Fannie and Freddie should be studied and handled separately due to their size. They also have historic philosophical ties to these agencies, which for years helped to provide affordable housing to thousands of Americans.

The House's bill did not mention regulation of Fannie and Freddie. No Republicans voted for it. The Senate one did include only a study of overhauling Fannie and Freddie and got four GOP votes.

Because Democrats control both houses of Congress and the conference, Royce and his GOP colleagues had little real chance of including Fannie and Freddie regulation. But before the debate began he still felt "somewhat confident."

"The big debate is this week," Royce said Monday. "It's my hope that I can convince my colleagues by reminding them of the history."

But Rep. Barney Frank, D-Mass., who is chairing the panel, ruled that several amendments about Fannie and Freddie did not relate to the content of the bill – effectively ending the debate before it started.

Royce and other Republicans loudly objected, but they couldn't overrule Frank.

While he was not able to address his main concern, Royce did win a small victory when the panel accepted his amendment to deny employees of organizations convicted of election violations from being appointed to the new Consumer Advisory Board, which will oversee financial products. The amendment was targeted at ACORN, which has lonhg pushed for loans for affordable housing. Some of its employees were convicted last year of voter registration fraud.

And while the amendments related to Fannie and Freddie were not formally debated, Royce brought up the troubled institutions at every opportunity Tuesday - even mentioning them during the debate on other aspects of the bill.

Royce and Frank verbally sparred for much of the day, with each occasionally interrupting the other.

Royce's cause got a boost late Tuesday when Senate Banking Committee Chairman Sen. Chris Dodd, D-Conn., ruled that amendments about regulating Fannie and Freddie did apply to the debate on the Senate side of the panel. Republican senators offered amendments similar to Royce's. While they were debated, Democrats rejected them.

Royce has said he will not support the final bill without language about Fannie and Freddie. But he's not likely to get another opportunity to bring the subject up.

Frank and Dodd are hoping to finish work on the bill by Thursday. Both houses will have to pass the committee's compromise before it becomes law. Democrats are hoping to get that done by the July 4 recess.

Royce is not giving up on reforming Fannie and Freddie.

"The loss could be half a trillion dollars, and that's just the cost to taxpayers," he said Tuesday. "That is why we had best take a few minutes and consider this."

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